Sporting a starting dividend yield of 5.5%, I receive a ton of questions here about AT&T (NYSE: T). By popular demand, today's video is a fundamental analysis of AT&T stock, from a dividend growth investing (long-term, value-oriented) standpoint. Is this the best dividend stock for 2018, or is it one worth passing on? Let's see!
Most importantly for dividend investors, I start with the current yield and dividend growth rate. Based on recent history, AT&T is growing their dividend around 2% every year. (Or, their quarterly dividend increases by one penny per year.) As a utility company, this does not surprise me. One trades dividend growth for current yield. That being said, 2% is a bit sluggish, in my opinion. By contrast, one of my regulated electric utilities (Southern Company) is growing its dividend faster.
In addition to dividend yield and growth, today's video covers a multitude of topics including:
* Market capitalization and how AT&T is a really big, blue chip company.
* How the PE ratio for AT&T on Yahoo! Finance is completely misleading. The current PE is represented as 7.7, which is potentially luring in value investors with wacky data. Learn how I personally spot check PE ratios and other numbers, and how I break down data to find the truth behind weird numbers. Learn why a lot of PE ratios right now are a bit weird, due to tax reform. It's all about pulling one's own data and thinking critically.
* Learn about fundamental analysis and how I pull data from quarterly and annual reports (10-Qs and 10-Ks).
* See how tax reform is creating a lot of value for dividend stocks in the short run. That said, see why I don't place a ton of value of tax reform for the long term.
* Check out top line growth, which has been quite impressive for T.
* See how debt growth has been rapid, and is concerning for this dividend growth investor (both the growth rate and the aggregate amount of debt taken out).
* See why AT&T has a huge book value, but why I don't personally assign much value to their assets.
At the end of the day, there are some great things about AT&T. They are a big company with a lot of history. We all need to access the Internet. They are growing quickly in Latin America, although international is still a small potion of their business.
There are also some cons: They are not regulated (meaning consumers can easily switch to another provider). A nuts and bolts type of business, I don't see a huge competitive advantage nor brand loyalty. Moreover, a disrupter could come along and say "free Internet for all". On top of that, capital expenditure and investment in the network could continue to be huge (meaning: more debt on the way).
With the pros and cons under consideration, T does not make my personal watch list. I just don't have the passion for this company that I do for the 36 holdings in my portfolio. That said, I would love to hear from the community. What do you think about AT&T?
Want to learn more about fundamental stock analysis? The following videos may be very helpful.
My stock screens video:
https://www.youtube.com/watch?v=DP6_mtdDYBIMy income statement analysis video:
https://www.youtube.com/watch?v=fDxYxsvPc_sMy balance sheet analysis video:
https://www.youtube.com/watch?v=mqPvUUDgFl0Want to learn about a regulated electric utility that I personally own? Here are my thoughts on Southern Company (SO):
https://www.youtube.com/watch?v=SW_jAVvhEqwWant to connect on Instagram? I’m actively answering questions over on Instagram. Of course, I’m actively answering questions here on YouTube too!
https://www.instagram.com/ianlopuch/Disclosure: I am long Southern Company (SO) and Kimberly-Clark (KMB). I own both of these stocks in my portfolio.
Disclaimer: I'm not a licensed investment advisor, and today's video is just for entertainment and fun. This video is NOT investment advice. Please talk to your licensed investment advisor before making any financial decisions.
All content on my YouTube channel is (c) Copyright IJL Productions LLC.
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